Eregli Demir ve Celik Fabrikalari T.A.S. -- Moody's downgrades seven Turkish corporates to B3 following sovereign downgrade; stable outlook

Rating Action: Moody's downgrades seven Turkish corporates to B3 following sovereign downgrade; stable outlookGlobal Credit Research - 16 Aug 2022Milan, August 16, 2022 -- Moody's Investors Service ("Moody's") today downgraded the ratings of seven non-financial corporates domiciled in Turkiye and changed the outlook to stable.Today's rating actions follow the weakening of the Turkish government's credit profile, as captured by Moody's recent decision to downgrade Turkiye's government bond ratings to B3 from B2 and change the outlook to stable from negative. Moody's also lowered Turkiye's foreign currency bond ceiling to B3 from B2. For further information, refer to the sovereign press release published on 12 August 2022: https://www.moodys.com/research/--PR_468377.Moody's has downgraded the ratings of the following seven Turkish corporates to B3 from B2 with stable outlooks:• Eregli Demir ve Celik Fabrikalari T.A.S. (Erdemir)• Koc Holding A.S. (Koc Holding)• Ordu Yardimlasma Kurumu (OYAK)• Petkim Petrokimya Holding A.S. (Petkim)• Turkcell Iletisim Hizmetleri A.S. (Turkcell)• Turkiye Petrol Rafinerileri A.S. (Tupras)• Turkiye Sise ve Cam Fabrikalari A.S. (Sisecam)Moody's has also repositioned the national scale corporate family rating (CFR) of Erdemir to A3.tr from A2.tr to reflect the mapping of Global Scale Ratings to National Scale Ratings.Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL468660 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.RATINGS RATIONALEThe rating actions on these corporates are a direct consequence of the downgrade of the Government of Turkiye and the lowering of Turkiye's foreign currency bond ceiling, both to B3. As a result, corporates which were previously constrained at the B2 ceiling are now constrained at B3. The stable outlooks continue to reflect the stable outlook on the sovereign rating.Most rated corporates continue to have prudent financial policies, adequate liquidity, moderate leverage and strong business profiles which in some cases is supported by geographic diversification outside of Turkiye or export revenues. However, their ratings are constrained by the foreign currency bond ceiling because these companies are materially exposed to Turkiye's political, legal, fiscal and regulatory environment.For Petkim, the downgrade of the ratings to B3 from B2 also reflects the weakening in the company's liquidity ahead of its January 2023 $500 million notes maturity, which is a Governance consideration under Moody's ESG methodology. While Petkim had $437 million in cash as of the end of June 2022, this will not be sufficient to repay the company's $500 million notes, capital spending of around $220 million and working capital movements. Nevertheless, the B3 CFR and stable outlook assume that Petkim will roll-over its working capital facilities and the notes will be refinanced by receiving timely support from its majority shareholder, State Oil Company of the Azerbaijan Republic (SOCAR, Ba1 stable) ahead of the notes' maturity. The rating assumes that SOCAR has both the willingness and capacity to support Petkim. SOCAR continues to see Petkim as a strategic investment that aligns with its objective to establish itself as a major industrial investor in Turkiye. In addition, SOCAR has a cross-default clause in its documentation related to SOCAR's subsidiaries, including Petkim's outstanding borrowings. This rating action concludes the review that was initiated on Petkim on 16 June 2022.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings of the above listed companies could be upgraded if Turkiye's foreign-currency bond ceiling is raised. This would also require no material deterioration in the companies' operating and financial performance, market positions and liquidity.Their ratings could be downgraded in case of a further downgrade of Turkiye's sovereign rating and a lowering of the foreign-currency bond ceiling. In addition, downward rating pressure could arise if there are signs of a deterioration in liquidity or if government imposed measures were to have an adverse impact on corporate credit quality.In addition to the above, the following company specific rating guidance applies.PETKIMAbsent sovereign considerations, positive pressure on the rating would require a strengthening of Petkim's liquidity position including significantly reduced reliance on short-term facilities. An upgrade would also require credit metrics to remain well positioned for a B2 rating such that adjusted gross debt/EBITDA is sustained below 4.0x through the commodity cycle.Downward pressure on the rating could occur if Petkim's liquidity position weakens and if the company is not able to secure funding ahead of its January 2023 notes maturity in a timely manner.PRINCIPAL METHODOLOGY The principal methodologies used in rating Turkcell Iletisim Hizmetleri A.S. were Telecommunications Service Providers published in January 2017 and available at https://ratings.moodys.com/api/rmc-documents/48906, and Government-Related Issuers Methodology published in February 2020 and available at https://ratings.moodys.com/api/rmc-documents/64864. The principal methodology used in rating Eregli Demir ve Celik Fabrikalari T.A.S. was Steel published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/356428. The principal methodology used in rating Koc Holding A.S. and Ordu Yardimlasma Kurumu (OYAK) was Investment Holding Companies and Conglomerates published in July 2018 and available at https://ratings.moodys.com/api/rmc-documents/56472. The principal methodology used in rating Turkiye Petrol Rafinerileri A.S. was Refining and Marketing published in August 2021 and available at https://ratings.moodys.com/api/rmc-documents/74331. The principal methodology used in rating Turkiye Sise ve Cam Fabrikalari A.S. was Manufacturing published in September 2021 and available at https://ratings.moodys.com/api/rmc-documents/74970. The principal methodology used in rating Petkim Petrokimya Holding A.S. was Chemicals published in June 2022 and available at https://ratings.moodys.com/api/rmc-documents/389870. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies. Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in August 2022 entitled "Mapping National Scale Ratings from Global Scale Ratings Methodology". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1280297.The local market analyst for Koc Holding A.S., Turkiye Petrol Rafinerileri A.S. and Turkiye Sise ve Cam Fabrikalari A.S. ratings is Iker Ballestero Barrutia, +971 (423) 795-21. The local market analyst for Turkcell Iletisim Hizmetleri A.S. ratings is Lisa Jaeger, +971 (423) 796-59. The local market analyst for Petkim Petrokimya Holding A.S. ratings is Julien Haddad, +971 (423) 795-39.REGULATORY DISCLOSURESThe List of Affected Credit Ratings announced here are a mix of solicited and unsolicited credit ratings. For additional information, please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL468660 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items: • EU Endorsement Status • UK Endorsement Status • Rating Solicitation • Issuer Participation • Participation: Access to Management• Participation: Access to Internal Documents• Lead Analyst• Releasing Office• Person Approving the Credit RatingFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.The below contact information is provided for information purposes only. For disclosures on the lead rating analyst and the Moody's legal entity that issued the rating, please see the issuer/deal page on https://ratings.moodys.com for each of the ratings covered.The relevant office for each credit rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the website.One or more of the above ratings is released from Moody's Investors Service Middle East Limited which is Regulated by the DFSA.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. 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